Correlation Between Microsoft and Evertec
Can any of the company-specific risk be diversified away by investing in both Microsoft and Evertec at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Evertec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Evertec, you can compare the effects of market volatilities on Microsoft and Evertec and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Evertec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Evertec.
Diversification Opportunities for Microsoft and Evertec
Very good diversification
The 3 months correlation between Microsoft and Evertec is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Evertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evertec and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Evertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evertec has no effect on the direction of Microsoft i.e., Microsoft and Evertec go up and down completely randomly.
Pair Corralation between Microsoft and Evertec
Given the investment horizon of 90 days Microsoft is expected to generate 0.82 times more return on investment than Evertec. However, Microsoft is 1.22 times less risky than Evertec. It trades about 0.12 of its potential returns per unit of risk. Evertec is currently generating about 0.05 per unit of risk. If you would invest 27,318 in Microsoft on January 20, 2024 and sell it today you would earn a total of 13,109 from holding Microsoft or generate 47.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. Evertec
Performance |
| Timeline |
| Microsoft |
| Evertec |
Microsoft and Evertec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Evertec
The main advantage of trading using opposite Microsoft and Evertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Evertec can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Evertec will offset losses from the drop in Evertec's long position.| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
| Evertec vs. Consensus Cloud Solutions | Evertec vs. Global Blue Group | Evertec vs. EverCommerce | Evertec vs. Sterling Check Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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